'New eyes' audit Bowie finances, report accepted

The Bowie City Council accepted its 2016-2017 outside audit report last week, and despite accounting adjustments that delayed the audit by several months the city’s finances are strong and in order.

Valerie Halverson of MWH Group, Wichita Falls, presented the audit report going through the highlights of the unmodified opinion.

Last September the council directed the city staff to solicit for audit services as they wanted to “get new eyes” on the financial operation. The Altman Group has prepared the audit the last three years and prior to that time, MWH, formerly Mathis, West, Huffines, prepared the audit.

The city sent out nine letters seeking an audit proposal and received only one proposal from MWH, along with a one-year option from Altman. Councilors went with MWH.
Halverson told the council she worked on the city’s audit in previous years so she was familiar with the operations. She said this year’s audit was challenging requiring a lot of adjustments to get good beginning numbers in some areas.

The auditor explained the city’s general ledger was for the most part well kept, but for some reason the reporting numbers did not match up with the ledger in some areas such as long-term liability and fixed capital asset balances. She took steps to restate the differences and then made sure they line up to match the accounting records.

“We had to grapple with numbers to get a good starting balance, the prior period adjustment was the biggest challenge this year which took us more time,” she stated.
In its management letter MWH summarized the uncorrected misstatements of the financial statements and management has determined their effects are immaterial, both individually and in the aggregate to the financial statements as a whole.

The auditor cited two material weaknesses within the city’s internal controls.
In controls over financial reporting the report states management should oversee the preparation of the financial statements and review and approve annual financial statements prior to issuance. It states certain balances reported in the financial statements for the year ended Sept. 30, 2016 were materially misstated.

The auditor believes the inadequate internal control resulted in the restatement of previously issued financial statements to reflect the correction of several material misstatements. It recommends a detailed review of all statements.

The city responded when it became aware of the reporting issues it took steps to obtain a new audit firm and it will implement additional controls for that review.

Finding two has been stated in city audits for many years and states internal controls are not optimal due to the lack of segregation of duties. The cause is due to the size of the city’s accounting and administrative staff as some staff members handle multiple tasks in regard to the financial activities and reporting.

Halverson said this is not an uncommon finding in the smaller cities. It states the staff’s size precludes certain internal controls that would be preferred if the staff was large enough to provide optimum segregation of duties.

It continues there is a possibility the misstatements would not have been detected or prevented by management or employees in a timely manner while performing their normal functions.

The auditor recommends the city always be aware of their deficiencies and be open to opportunities to improve their internal controls when they present themselves.

The city has responded it will remain aware of the need to improve and remains committed to council oversight and review of city functions and financial affairs.

Halverson said, “we feel like the city staff does a good job, but there was a pretty good disconnect with the prior auditor. It ultimately all falls back on the city so Halverson said they have to present a finding saying they should have been reviewed better before it went out.

Halverson was asked by Councilor Chuck Malone if there was “anything glaring” that seemed not right in the previous auditor’s findings they should be very concerned about.

Halverson said when they previously did the audit there were some accounts that were not adjusted until the year’s end, and in this audit they found some of those had not been adjusted since 2013. She called it “the sort of routine cleanup things we like to do when we come in and do an audit.”

Malone said he would be more direct asking if all the money has been accounted for. Halverson said emphatically cash was fine and there were no problems with those types of balances.

Carrie Moore, interim finance director, said in the adjustments how things were recorded was the issue where the auditor came at it from a different perspective.

Mayor Gaylynn Burris asked Moore if she felt confident in the audit. Moore said the had worked with MWH in the past and when the city moved away from them there were no issues, but as with this time some wanted fresh eyes which she added is not necessarily a bad thing.

“I am confident in them. I didn’t get a chance to look at all the adjusting entries, there is some flexibility in those,” said Moore.

Burris asked for a motion to accept the audit and when none was made she explained the audit, which was already delayed, had to be submitted to entities by Friday.

Those groups include companies that handle the bond ratings such as Dunn and Bradstreet. Burris said not accepting will be costly to the city.

Councilor Craig Stallcup made a motion, second by Wayne Bell and receiving unanimous approval all around.